What is the difference between Lossy and Lossless compression ?

Audio Compression can be one of two categories, lossless or lossy.  Lossless compression algorithms return audio data that is identical to the original audio information.  Lossless compression sounds wonderful, however it does not yield an extremely high compression ratio.  Typically, lossless routines give a ratio no higher than 2:1 for realtime playback for audio with a full dynamic range.

Lossy Audio Compression can yield a variety of different rates of compression based on the ability of your hardware and software to decode and playback the music audio data in real-time.  There are various compression schemes to achieve different results; for example, many codecs remove portions of the audio signal that human hearing is less sensitive to.  To some peoples ears the resulting audio has distinguishing artifacts or characteristics that change the listening experience.  The final "quality" level is largely a matter of personal perception.